Under the Fair Labor Standards Act (), you must pay employees time-and-a-half overtime pay based on the workers' "regular rate of pay." That regular rate includes the person's salary or wages, plus certain other compensation, including, as the following case shows, nondiscretionary bonuses.
But be aware that you can exclude certain compensation from employees' regular rates of pay when calculating overtime. These include gifts, Christmas bonuses or other rewards that aren't based on production, efficiency or hours worked.
Recent case: Firefighters who accumulated at least six months of sick leave could "sell back" additional leave to the city at 75 percent of their hourly wage. The city didn't count that sick leave buyback compensation toward the firefighters' "regular rate of pay" to calculate overtime pay, so they sued.
A federal district court agreed with the firefighters, saying that a bonus should be included in an employee's rate of pay if it's nondiscretionary. The court said the city's sick-leave buyback program was considered a nondiscretionary bonus because the city couldn't choose whether to pay. (Acton v. City of Columbia, No. 03-4159-CV-NKL, W.D. Mo., 2004)